As the world becomes increasingly digital, financial institutions and enterprises are facing a new challenge: onboarding and connecting to a proliferating number of real-time payments schemes.
In the United States, for example, instant payments loom as FedNow is set to launch in a matter of weeks.
As Form3 Chief Product Officer Mike Walters told PYMNTS: The dozens of real-time and account-to-account schemes taking shape around the globe are marked by varying levels of maturity, varying stages of scale, and varying rates of growth.
Walters highlighted the fact that there’s a lack of standardization — and it’s a major hurdle — in integrating with different payment schemes. Real-time payment activities are localized and different across various geographies, adding another layer of complexity to the integration process. Some schemes support transaction reversals, others don’t, and some might allow for transactions to be “recalled” entirely.
Additionally, operational variations exist for banks that consume and initiate transactions in different payment schemes, making it difficult to create a one-size-fits-all solution.
“Even in a world where message content standardization is a theme, that’s not really solving a whole range of these challenges,” he explained, as some schemes’ integration can be done remotely, some can be done in the cloud and still others require connections via actual cables and lines.
To address those pain points, Payments-as-a-Service is gaining traction as an approach that can help to anticipate and address changes in regulatory schemes and ease any technical heavy lift that confronts stakeholders. Form3, by way of example, has built a platform service that offers a single application programming interface (API) integration for customers, he said.
The platform streamlines the integration process and allows FIs to focus on their core business, rather than the technical complexities of payment processing, he said. By offering a platform for FIs to consume in a way that matches their technology, payment service providers can help reduce friction from having to consume local and independent pieces of technology.
And with a nod toward connecting to the various payment schemes, Walters said: “If you do the investment to connect to one, you get a high degree of reuse when you do a second, when you do a third, when you do a fourth, and effectively put the burden on those differences and the harmonization of those differences onto your technology provider. And that maintenance may be security-driven, it may be about resilience, it may be scaling. It may also be changes in the underlying scheme requirements.”
Walters also said the platform technology allows for similar use cases to evolve on technical platforms that still leverage local payment offerings and technologies.
“I think we will probably see that happen significantly faster than we would necessarily see very high volumes across a central infrastructure flow,” he said.
Resilience remains critical to the operation of, and trust in, real-time payment schemes, especially as they connect across country borders and time zones. Payments-as-a-Service, he said, has come of age and can help FIs deal with double-digit percentage growth rates of transactions year in and year out.
As Walters told PYMNTS, “interoperability and the ability to genuinely create a real-time, traceable, cross-border flow is absolutely feasible.”
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